Sunday, July 13, 2008

Following Total decision to abandon developing Southern Pars, Gazprom, Russian natural gas monopoly OAO, stepped in to fill the void. Its Chief executive Alexei Miller met Iranian President Mahmoud Ahmadinejad in Tehran to talk business. Later the heads of Gazprom and National Iranian Oil Co. discussed ''creating a joint enterprise to carry out exploration and production of gas and oil fields, construction of oil and gas processing facilities, and transport inside Iran”.

This development increases the cooperation between Iran and Russia in the energy sector, a field where Russia is seeking to play a more prominent role. It also reduces the mutual interests between Iran and EU. This adds to incessant decline in the volume of trade between Iran and EU countries.

An increasing number of Iranian businesses, both semi-private and private ones, had to start working with Chinese and Russian counterparts. Their European partners halted their business dealings with Iran following UN implemented sanctions. This has weakened those who advocate accommodating EU countries and UN Security Council over its nuclear issues. They had been arguing that Iran’s persistence has cost its economy dearly. However shifting the major business interests to Russia and China has enabled the government to argue that Iranian businesses do not have any common ground with EU any more.

The unfortunate fact is that EU partners in Iran are mainly private sector, while Iranian firms in the new business ventures are either publicly owned or are related to the public institutions. One wonders if sanctions are hurting Iranian private sector most, the only group that actually have incentives to encourage moderation.